2004 (12) TMI 34 - HC - Income Tax

Court rules on disallowance under section 43B of Income-tax Act

The High Court of ALLAHABAD upheld the deletion of an addition of Rs. 13,543 made by the Income-tax Officer under section 43B of the Income-tax Act, 1961. ... Addition u/s 43B – assessee had shown a sum as payable in sales tax and as well as duty account - ITO applying the provisions of section 43B disallowed the aforesaid amount on the ground that it has not been paid over to the Government - It is not in dispute that the collections made in the month of March are towards the statutory duty during the month of March, 1984, which was to be paid over to the Government in the month of April in accordance with the relevant statutory rules. The Board Circular No. 372 dated December 8, 1983, provides that in respect of the amounts which a collected in the month of March on the last date of the end of the financial year, i.e., March 31,1984, and has to be paid over in the next financial year, such amount cannot be disallowed under section 43B of the Act. It is well settled that the circular issued by the Central Board of Direct Taxes is binding on the authorities. Issues:1. Interpretation of section 43B of the Income-tax Act, 1961 regarding the addition of a specific amount.Analysis:The High Court of ALLAHABAD was tasked with determining the legality of deleting an addition of Rs. 13,543 made by the Income-tax Officer under section 43B of the Income-tax Act, 1961 for the assessment year 1984-85. The respondent, a registered firm, had shown this amount as payable in sales tax and duty account. The Income-tax Officer disallowed the amount, stating it had not been paid to the Government. However, the Appellate Assistant Commissioner, citing Board Circular No. 372 dated December 8, 1983, allowed the claim, explaining that the sum represented collections made in March, payable in April. The Tribunal upheld this decision.The Court considered the collections made in March towards statutory duty, to be paid over to the Government in April as per relevant rules. Referring to Board Circular No. 372 dated December 8, 1983, the Court highlighted that amounts collected in March and due in the next financial year cannot be disallowed under section 43B of the Act. It emphasized the binding nature of circulars issued by the Central Board of Direct Taxes on authorities. Consequently, the Court answered the legal question in favor of the Revenue and against the assessee, upholding the deletion of the addition of Rs. 13,543.In conclusion, the High Court's judgment clarified the application of section 43B of the Income-tax Act, 1961 in the context of amounts collected in one financial year but due in the subsequent year. The decision underscored the significance of Board Circulars in interpreting tax laws and upheld the Tribunal's ruling in favor of the Revenue, emphasizing compliance with statutory rules and circulars for tax assessments.